Logic vs. Emotion in a Rent vs. Sell Decision

[Duane Gunkler]

So, the TL;DR version -- 5BR 4.5BA house.  Value about $500k, owe $258k -- 30 year @ 2.25%.  Rent about $2,800 and cash flow about $800 after cap ex, op ex, etc.  Logic = Rent.  Emotion side is that it was my wife's and late husband's house, so she wants to sell.  

As you can see from the brief description above, I'm in a tough spot with this house. It was my new wife and her late husband's primary residence and the home they built where they raised their two children from 2016 - 2019 when they lost him. We have since built our own new home and moved out of the property and it is now vacant. Obviously there is a tremendous amount of emotion tied to the property. She would like to sell it so that it's not a constant reminder and I completely understand why she would feel that way. Obviously, on paper, I would much rather keep the home and rent it out having such great equity and an amazing rate. It is in a very desirable neighborhood with amazing amenities. It has a VA loan currently, so if we were to sell, I suppose I could try to market to other VA-eligible buyers so that they could maybe keep the 2.25% if that's an option to try to add value. Just curious to get the thoughts of some fellow REI folks to see your thoughts on this one?

[Joe Villeneuve]

You have almost 250k in equity wasting away.  800/month = 9600/year in CF.  That means from this point forward, it would take you 26 years for the accumulated CF to equal your current equity.

If you sold the property, even after closing costs, you would walk away with at least 150+ in cash.  Take that 150 and use it as a DP and the new PV would be 750k.  Right now it's at only 500k.  This impacts you moving forward since appreciation is applied to the PV, not the equity.  The equity grows as the appreciation grows, on a 1 to 1 basis.  This means if both houses (500 and 750 PV) has the appreciation, the 750k property would grow exponentially faster.  Not to mention the added CF to what you would experience now since the new property would be worth 50% more than the current one.